Merck Announces Third Quarter 2011 Financial Results

  • Double-Digit Non-GAAP EPS Growth in Third Quarter 2011; Non-GAAP EPS of $0.94; GAAP EPS of $0.55
  • Worldwide Sales Growth of 8 Percent, Including 5 Percent From Foreign Exchange; Increase Driven by Pharmaceutical and Animal Health Sales
  • Double-Digit Global Growth for JANUVIA, GARDASIL, SINGULAIR, JANUMET and ISENTRESS
  • JUVISYNC and VICTRELIS and Other Product Launches Underway
  • Company Raises Lower End of 2011 Non-GAAP EPS Range; Provides New Range of $3.72 to $3.76; Also Updates GAAP EPS Range to $2.03 to $2.20; Expects Full Year 2011 Revenue Growth in the Mid-Single Digit Range

WHITEHOUSE STATION, N.J.--()--Merck (NYSE: MRK), known as MSD outside the United States and Canada, today announced financial results for the third quarter of 2011.

       
$ in millions, except EPS amounts  

Third
Quarter
2011

 

Third
Quarter
2010

Sales  

$

12,022

 

 

$

11,125

 

GAAP EPS     0.55       0.11  

Non-GAAP EPS that excludes items listed below 1

    0.94       0.85  

GAAP Net Income 2

    1,692       342  
Non-GAAP Net Income that excludes items listed below

1, 2

    2,908       2,645  

Non-GAAP (generally accepted accounting principles) earnings per share (EPS) for the third quarter of $0.94 excludes acquisition-related costs, restructuring costs and certain other items.

A reconciliation of GAAP to non-GAAP net income and EPS is provided in the tables that follow.

       

Third
Quarter
2011

 

Third
Quarter
2010

$ in millions, except EPS amounts  

Net

Income 2

  EPS   Net

Income 2

  EPS
GAAP   $ 1,692     $ 0.55     $ 342   $ 0.11  
Difference     1,216      

0.39

 3

    2,303    

0.74

 3

Non-GAAP that excludes items listed below   $ 2,908     $ 0.94     $ 2,645   $ 0.85  
   
     
$ in millions  

Third
Quarter
2011

 

Third
Quarter
2010

Acquisition-related costs 4

  $ 1,363     $ 1,604  
Costs related to restructuring programs     277       387  

Other 5

    (137 )     -  
Legal reserve     -       950  
Net decrease (increase) in income before taxes     1,503       2,941  

Income tax (benefit) expense 6

    (287 )     (638 )
Decrease (increase) in net income   $ 1,216     $ 2,303  

Year-to-date results can be found in the attached financial tables.

"Merck once again delivered a strong quarter," said Kenneth C. Frazier, president and chief executive officer, "coupling top line growth and strong expense management to report an 11 percent increase to the bottom line.

"Going forward, Merck will continue to implement our growth strategy, while transforming the way we operate our business," he said. "Three consecutive quarters of top and bottom line growth demonstrate our ability to consistently perform while at the same time make the strategic investments necessary for the future. We remain focused on driving innovation and value for our customers and shareholders over the long term."

Select Revenue Highlights

Worldwide sales were $12.0 billion for the third quarter of 2011, an increase of 8 percent compared with the third quarter of 2010. Foreign exchange for the quarter favorably affected global sales performance by approximately 5 percent. The revenue increase largely reflects strong sales of JANUVIA (sitagliptin), GARDASIL [Human Papillomavirus Quadrivalent (Types 6, 11, 16 and 18) Vaccine, Recombinant], SINGULAIR (montelukast sodium), JANUMET (sitagliptin/metformin hydrochloride), ISENTRESS (raltegravir) and ZOSTAVAX (zoster vaccine live). Sales from emerging markets accounted for approximately 17 percent of pharmaceutical sales in the quarter.

The table below reflects sales of the company's top Pharmaceutical products, as well as total sales of Animal Health and Consumer Care products.

           

$ in millions

  Third

Quarter

2011

  Third

Quarter

2010

 

Change

Total Sales  

$

12,022

 

 

$

11,125

 

 

8

%

Pharmaceutical 7

    10,354       9,523     9 %
SINGULAIR     1,336       1,215     10 %
JANUVIA     846       600     41 %
ZETIA     614       571     8 %
REMICADE     561       661     -15 %
VYTORIN     469       485     -3 %
GARDASIL     445       316     41 %
COZAAR/HYZAAR     404       423     -4 %
PROQUAD, M-M-R II and VARIVAX     391       434     -10 %
JANUMET     350       247     42 %
ISENTRESS     343       278     23 %
NASONEX     266       259     3 %
Animal Health     826       687     20 %
Consumer Care 7     421       409     3 %

Other Revenues 8

    421       506     -17 %

Worldwide sales of the combined diabetes franchise of JANUVIA/JANUMET grew 41 percent to $1.2 billion in the third quarter of 2011 driven by growth in all regions.

Worldwide sales of SINGULAIR, a once-a-day oral medicine indicated for the chronic treatment of asthma and the relief of symptoms of allergic rhinitis, grew 10 percent from the third quarter of 2010 to $1.3 billion.

Global sales declined 8 percent in the quarter for REMICADE (infliximab) and SIMPONI (golimumab), treatments for inflammatory diseases, as the company transferred exclusive marketing rights for REMICADE and SIMPONI to Johnson & Johnson in territories including Canada, Central and South America, the Middle East, Africa and Asia Pacific, effective July 1, 2011. Merck retained exclusive marketing rights to these products throughout Europe, Russia and Turkey. In territories retained by Merck, the combined sales of REMICADE and SIMPONI grew 35 percent.

Sales of GARDASIL, a vaccine to help prevent certain diseases caused by human papillomavirus, were $445 million in the quarter driven by increased vaccination of both females and males and wholesaler purchases in conjunction with the launch in Japan.

As expected, global sales of Merck's antihypertensive medicines COZAAR (losartan potassium) and HYZAAR (losartan potassium and hydrochlorothiazide) continue to decline following loss of marketing exclusivity in the United States and in major European markets in 2010. Sales of TEMODAR (temozolomide), a treatment for certain types of brain tumors, declined due to generic competition in Europe.

ISENTRESS, an HIV integrase inhibitor for use in combination with other antiretroviral agents for the treatment of HIV-1 infection, grew 23 percent in the third quarter driven by demand in the United States and Europe.

Sales of ZOSTAVAX were $108 million in the quarter. Supply availability has improved and current wait time for delivery is now under one month. The company anticipates that backorders will continue until inventory levels are sufficient to meet market demand.

Product Performance – Animal Health

Merck Animal Health sales totaled $826 million for the third quarter of 2011, a 20 percent increase over the same period last year, including a 6 percent contribution from foreign exchange. Animal Health had strong third-quarter performance across all regions, with growth primarily led by increased sales of cattle, swine and poultry products. This growth was driven equally by new products and existing products. The division's products include pharmaceutical and vaccine products for the prevention, treatment and control of disease in all major farm and companion animal species.

Product Performance – Consumer Care

Merck Consumer Care third-quarter global sales were $421 million, an increase of 3 percent compared to the third quarter of 2010, including a 2 percent contribution from foreign exchange. The sales growth was primarily led by increased sales of MIRALAX and ZEGERID OTC. Consumer Care includes a variety of over-the-counter medicines, as well as footcare and suncare products.

Third Quarter Expense and Other Information

The costs detailed below on a GAAP basis during the third quarter of 2011 totaled $9.8 billion and include $1.6 billion of acquisition-related costs and restructuring costs.

   
$ in millions Included in the expense for the period
Third Quarter 2011   GAAP  

Acquisition-
Related Costs 4

 

Restructuring
Costs

  Non-GAAP 1
Materials and production  

$

4,352

 

 

$

1,284

 

 

$

99

 

 

$

2,969

 

Marketing and administrative     3,340       57       31       3,252  
Research and development     1,954       22       28       1,904  
Restructuring costs     119       -       119       -  
     
 
Third Quarter 2010                
Materials and production   $ 4,191     $ 1,351     $ 44     $ 2,796  
Marketing and administrative     3,192       64       130       2,998  
Research and development     2,322       189       163       1,970  
Restructuring costs     50       -       50       -  

The gross margin was 63.8 percent for the third quarter of 2011 and 62.3 percent for the third quarter of 2010, reflecting 11.5 and 12.6 percentage point unfavorable impacts, respectively, from the acquisition-related costs and restructuring costs noted above.

Marketing and administrative expenses, on a non-GAAP basis, were $3.3 billion in the third quarter of 2011, an increase from $3.0 billion in the third quarter of 2010. The increase was due to the impact of foreign exchange, investments in emerging markets and product launches, and U.S. health care reform fees.

Research and development expenses, on a non-GAAP basis, were $1.9 billion in the third quarter of 2011, a decrease from $2.0 billion in the third quarter of 2010. The decrease was primarily due to efficiency savings and lower clinical trial grant expenses.

Equity income from affiliates was $161 million in the third quarter, which primarily includes partnerships with AstraZeneca LP, Sanofi Pasteur MSD and the recently divested Johnson & Johnson°Merck Consumer Pharmaceuticals Company joint venture.

Other (income) expense, net was $66 million of expense in the third quarter of 2011, which reflects a $136 million gain on the divestiture of the company’s interest in the Johnson & Johnson°Merck Consumer Pharmaceuticals Company joint venture, compared with $1.1 billion of expense in the third quarter of 2010, which includes the unfavorable impact of a $950 million legal reserve.

Key Developments

  • The U.S. Food and Drug Administration (FDA) approved JUVISYNC (sitagliptin and simvastatin), a new treatment for type 2 diabetes that combines the glucose-lowering medication sitagliptin, the active component of JANUVIA, with the cholesterol-lowering medication ZOCOR (simvastatin).
  • The European Commission approved ZOELY (nomegestrol acetate 2.5 mg /17-beta estradiol 1.5 mg), formerly known as NOMAC-E2, a monophasic combined oral contraceptive tablet for use by women to prevent pregnancy.
  • The FDA and the European Medicines Agency have accepted the company's applications for the approval of ridaforolimus, an investigational oral mTOR inhibitor developed for the treatment of metastatic soft-tissue or bone sarcomas in patients who had a favorable response to chemotherapy.
  • VICTRELIS (boceprevir), the company's oral hepatitis C virus NS3/4A protease inhibitor, has launched in 10 markets in the third quarter: Brazil, Canada and eight markets in the European Union including France, Germany, the UK and Spain.
  • Merck is collaborating with Beijing-based BGI, the world's largest genomics center, to focus on the discovery and development of biomarkers and genomics technologies. Scientists will work together to identify and characterize biomarkers with an emphasis on drug discovery, drug development and diagnostics applications across a wide range of therapeutic areas.
  • Richard R. DeLuca Jr. joined Merck as president of Animal Health and Cuong Viet Do joined as the company's chief strategy officer.
  • The company is hosting its 2011 R&D and Business Briefing on Nov. 10.

Financial Targets

The company raised the lower end of its 2011 non-GAAP EPS range and is now targeting a range of $3.72 to $3.76. The company updated the 2011 GAAP EPS range to $2.03 to $2.20. The 2011 non-GAAP range excludes acquisition-related costs, costs related to restructuring programs, the benefit of certain tax items and certain other items.

Merck now expects full year 2011 revenue to grow in the mid-single digit percent range from a base of $46.0 billion in 2010.

In addition, the company lowered its non-GAAP R&D expense target range to $7.8 billion to $8.0 billion for the full year of 2011.

The company expects its non-GAAP 2011 tax rate to be at the upper end of its target range of 23 to 24 percent.

A reconciliation of anticipated 2011 EPS as reported in accordance with GAAP to non-GAAP EPS that excludes certain items is provided in the table below.

   

$ in millions, except EPS amounts

  Full Year 2011
GAAP EPS   $2.03 to $2.20
Difference 3   1.69 to 1.56
Non-GAAP EPS that excludes items listed below   $3.72 to $3.76
 
     
Acquisition-related costs 4   $5,700 to $5,400
Costs related to restructuring programs   1,500 to 1,300
Arbitration settlement charge   500

Other 9

  (263)
Net decrease (increase) in income before taxes   7,437 to 6,937

Income tax (benefit) expense 10

  (2,210) to (2,110)
Decrease (increase) in net income   $5,227 to $4,827

Total Employees

As of September 30, 2011, Merck had approximately 90,000 employees worldwide.

Earnings Conference Call

Investors are invited to a live audio webcast of Merck's third quarter earnings conference call today at 8:00 a.m. EDT by visiting Merck's Web site, www.merck.com/investors/events-and-presentations/home.html. Institutional investors and analysts can participate in the call by dialing (706) 758-9927 or (877) 381-5782. Journalists are invited to monitor the call by dialing (706) 758-9928 or (800) 399-7917. A replay of the call will be available starting at 11 a.m. EDT today for approximately one week. To listen to the replay, dial (706) 645-9291 or (800) 642-1687 and enter ID No. 11773565.

About Merck

Today's Merck is a global healthcare leader working to help the world be well. Merck is known as MSD outside the United States and Canada. Through our prescription medicines, vaccines, biologic therapies, and consumer care and animal health products, we work with customers and operate in more than 140 countries to deliver innovative health solutions. We also demonstrate our commitment to increasing access to healthcare through far-reaching policies, programs and partnerships. For more information, visit www.merck.com and connect with us on Twitter, Facebook and YouTube.

Forward-Looking Statement

This news release includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Such statements may include, but are not limited to, statements about the benefits of the merger between Merck and Schering-Plough, including future financial and operating results, the combined company’s plans, objectives, expectations and intentions and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of Merck’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements.

The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: the possibility that the expected synergies from the merger of Merck and Schering-Plough will not be realized, or will not be realized within the expected time period; the impact of pharmaceutical industry regulation and health care legislation; the risk that the businesses will not be integrated successfully; disruption from the merger making it more difficult to maintain business and operational relationships; Merck’s ability to accurately predict future market conditions; dependence on the effectiveness of Merck’s patents and other protections for innovative products; the risk of new and changing regulation and health policies in the U.S. and internationally and the exposure to litigation and/or regulatory actions.

Merck undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in Merck’s 2010 Annual Report on Form 10-K and the company’s other filings with the Securities and Exchange Commission (SEC) available at the SEC’s Internet site (www.sec.gov).

1 Merck is providing certain 2011 and 2010 non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors' understanding of the company's performance. This information should be considered in addition to, but not in lieu of, information prepared in accordance with GAAP. For a description of the items, see Table 2a, including the related footnotes, attached to this release.

2 Net income attributable to Merck & Co., Inc.

3 Represents the difference between calculated GAAP EPS and calculated non-GAAP EPS which may be different than the amount calculated by dividing the impact of the excluded items by the weighted average shares.

4 Includes expenses for the amortization of intangible assets and amortization of purchase accounting adjustments to inventories recognized as a result of mergers and acquisitions, as well as intangible asset impairment charges. Also includes integration and other costs associated with mergers and acquisitions.

5 Includes the gain on the divestiture of the company’s interest in the Johnson & Johnson°Merck Consumer Pharmaceuticals Company joint venture.

6 Includes an estimated income tax (benefit) expense on the reconciling items. In addition, the amount for 2010 includes a $380 million tax benefit from changes in a foreign entity’s tax rate, which resulted in a reduction of deferred tax liabilities on intangibles established in purchase accounting.

7 In the first quarter of 2011, Merck changed the reporting for certain over-the-counter products. Sales of these products outside the United States were previously recorded in the Pharmaceutical business, and are now reported in the Consumer Care business. Prior period amounts have been recast on a comparative basis.

8 Other revenues are primarily comprised of alliance revenue, miscellaneous corporate revenues and third party manufacturing sales. Revenue from AstraZeneca LP recorded by Merck was $299 million in the third quarter of 2011.

9 Includes a gain on the divestiture of the company’s interest in the Johnson & Johnson°Merck Consumer Pharmaceuticals Company joint venture and a gain on the sale of certain manufacturing facilities and related assets.

10 Includes an estimated income tax (benefit) expense on the reconciling items. In addition, amount includes the net favorable impact of approximately $700 million relating to the settlement of a federal income tax audit, as well as the favorable impact of certain foreign and state tax rate changes that resulted in a net $230 million reduction of deferred tax liabilities on intangibles established in purchase accounting.

 

MERCK & CO., INC.

CONSOLIDATED STATEMENT OF OPERATIONS - GAAP

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 1

               
GAAP

% Change

GAAP % Change
3Q11   3Q10

Sep YTD
2011

 

Sep YTD
2010

               
Sales $ 12,022   $ 11,125 8% $ 35,753   $ 33,893 5%
 
Costs, Expenses and Other
Materials and production (1) 4,352 4,191 4% 12,695 13,956 -9%
Marketing and administrative (1) / (2) 3,340 3,192 5% 10,029 9,589 5%
Research and development (1) / (2) 1,954 2,322 -16% 6,048 6,552 -8%
Restructuring costs (3) 119 50 * 773 864 -11%
Equity income from affiliates (4) (161 ) (236 ) -32% (354 ) (417 ) -15%
Other (income) expense, net (1) / (5) 66 1,108 -94% 809 995 -19%
 

Income Before Taxes

2,352 498 * 5,753 2,354 *
 
Income Tax Provision 628 126 904 872
 
Net Income 1,724 372 * 4,849 1,482 *
 
Less: Net Income Attributable to Noncontrolling Interests 32 30 89 89
 
Net Income Attributable to Merck & Co., Inc. $ 1,692 $ 342 * $ 4,760 $ 1,393 *
 
Earnings per Common Share Assuming Dilution (6) $ 0.55     $ 0.11   * $ 1.53     $ 0.44   *
           
Average Shares Outstanding Assuming Dilution 3,091 3,102 3,102 3,123
 
Tax Rate (7)   26.7 %     25.3 %   15.7 %     37.1 %
 
*≥ 100%
(1) Amounts include the impact of acquisition-related costs and restructuring costs. See accompanying tables for details.
 
(2) The third quarter and first nine months of 2010 include a reclassification of certain expenses from marketing and administrative to research and development of $26 million and $78 million, respectively.
 
(3) Represents separation and other related costs associated with restructuring activities under the company's formal restructuring programs.
 
(4) Primarily reflects equity income from the AstraZeneca LP, Johnson & JohnsonºMerck Consumer Pharmaceuticals Company ("JJMCP"), and Sanofi Pasteur MSD partnerships. In the third quarter of 2011, the company divested its interest in the JJMCP joint venture.
 
(5) Other (income) expense, net in the third quarter and first nine months of 2011 includes a $136 million gain on the sale of the company's interest in the JJMCP joint venture. In addition, other (income) expense, net in the first nine months of 2011 includes a charge of $500 million related to the resolution of the arbitration proceeding with Johnson & Johnson and a $127 million gain on the sale of certain manufacturing facilities and related assets. Other (income) expense, net in the third quarter and first nine months of 2010 includes a $950 million legal reserve. In addition, other (income) expense, net in the first nine months of 2010 reflects $443 million of income recognized upon AstraZeneca's asset option exercise and $102 million of income on the settlement of certain disputed royalties.
 
(6) The company calculates earnings per share pursuant to the two-class method which requires the allocation of net income between common shareholders and participating security holders. Net income attributable to Merck & Co., Inc. common shareholders used to calculate earnings per common share assuming dilution was $1,689 million and $340 million for the third quarter of 2011 and 2010, respectively, and was $4,748 million and $1,387 million for the first nine months of 2011 and 2010, respectively.
 
(7) The GAAP effective tax rate for the third quarter of 2011 was 26.7%. The GAAP effective tax rate for the first nine months of 2011 was 15.7%, which reflects the net favorable impact of approximately $700 million related to the settlement of the company's 2002-2005 federal income tax audit. Excluding this item and the other non-GAAP reconciling items detailed in the accompanying tables, the effective tax rates were 23.7% and 24.5% for the third quarter and first nine months of 2011, respectively. The GAAP effective tax rates for the third quarter and first nine months of 2010 were 25.3% and 37.1%, respectively. Excluding the impact of the non-GAAP reconciling items detailed in the accompanying tables, the effective tax rates were 22.2% and 21.9% for the third quarter and first nine months of 2010, respectively.
 
 

MERCK & CO., INC.

CONSOLIDATED STATEMENT OF OPERATIONS

GAAP TO NON-GAAP RECONCILIATION

THIRD QUARTER 2011

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 2a

                                 
GAAP

Acquisition-
Related Costs (1)

Restructuring
Costs (2)

Certain Other
Items (3)

Adjustment
Subtotal

Non-GAAP
   
Sales $ 12,022 $ - $ 12,022
 
Materials and production 4,352 1,284 99 1,383 2,969
 
Marketing and administrative 3,340 57 31 88 3,252
 
Research and development 1,954 22 28 50 1,904
 
Restructuring costs 119 119 119 -
 
Equity income from affiliates (161 ) - (161 )
 
Other (income) expense, net 66 (137 ) (137 ) 203
 
Income Before Taxes 2,352 (1,363 ) (277 ) 137 (1,503 ) 3,855
 
Taxes on Income 628 (287 )

(4)

915
 
Net Income 1,724 (1,216 ) 2,940
 
Less: Net Income Attributable to Noncontrolling Interests 32 - 32
 
Net Income Attributable to Merck & Co., Inc. $ 1,692 $ (1,216 ) $ 2,908
 
Earnings per Common Share Assuming Dilution $ 0.55   $ 0.94  

(5)

   
Average Shares Outstanding Assuming Dilution 3,091 3,091
Tax Rate   26.7 %   23.7 %
Merck is providing non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors' understanding of the company's performance. This information should be considered in addition to, but not in lieu of, information prepared in accordance with GAAP.
 
 
(1) Amounts included in materials and production costs reflect expenses for the amortization of intangible assets and the amortization of purchase accounting adjustments to inventories recognized as a result of mergers and acquisitions. Amounts included in marketing and administrative expenses reflect integration costs, as well as other costs associated with mergers and acquisitions, such as severance costs which are not part of the company's formal restructuring programs. Amounts included in research and development expenses represent in-process research and development (“IPR&D”) impairment charges.
 
(2) Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to actions under the company's formal restructuring programs.
 
(3) Reflects the gain on the divestiture of the company's interest in the Johnson & JohnsonºMerck Consumer Pharmaceuticals Company joint venture.
 
(4) Represent the estimated tax impact on the reconciling items.
 
(5) The company calculates earnings per share pursuant to the two-class method which requires the allocation of net income between common shareholders and participating security holders. Net income attributable to Merck & Co., Inc. common shareholders used to calculate non-GAAP earnings per common share assuming dilution was $2,903 million for the third quarter of 2011.
 
                 

MERCK & CO., INC.

CONSOLIDATED STATEMENT OF OPERATIONS

 GAAP TO NON-GAAP RECONCILIATION

NINE MONTHS ENDED SEPTEMBER 30, 2011

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 2b

           

GAAP

Acquisition-
Related Costs (1)

Restructuring
Costs (2)

Certain Other
Items (3)

Adjustment
Subtotal

Non-GAAP
   
Sales $ 35,753 $ - $ 35,753
 
Materials and production 12,695 3,925 280 4,205 8,490
 
Marketing and administrative 10,029 192 77 269 9,760
 
Research and development 6,048 343 89 432 5,616
 
Restructuring costs 773 773 773 -
 
Equity income from affiliates (354 ) - (354 )
 
Other (income) expense, net 809 236 236 573
 
Income Before Taxes 5,753 (4,460 ) (1,219 ) (236 ) (5,915 ) 11,668
 
Taxes on Income 904 (1,955 )

(4)

2,859
 
Net Income 4,849 (3,960 ) 8,809
 
Less: Net Income Attributable to Noncontrolling Interests 89 - 89
 
Net Income Attributable to Merck & Co., Inc. $ 4,760 $ (3,960 ) $ 8,720
 
Earnings per Common Share Assuming Dilution $ 1.53   $ 2.80  

(5)

   
Average Shares Outstanding Assuming Dilution 3,102 3,102
Tax Rate   15.7 %   24.5 %
Merck is providing non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors' understanding of the company's performance. This information should be considered in addition to, but not in lieu of, information prepared in accordance with GAAP.
 
 
(1) Amounts included in materials and production costs reflect expenses of $3.8 billion for the amortization of intangible assets and the amortization of purchase accounting adjustments to inventories recognized as a result of mergers and acquisitions, as well as $118 million of impairment charges on product intangibles. Amounts included in marketing and administrative expenses reflect integration costs, as well as other costs associated with mergers and acquisitions, such as severance costs which are not part of the company's formal restructuring programs. Amounts included in research and development expenses represent in-process research and development (“IPR&D”) impairment charges.
 
(2) Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to actions under the company's formal restructuring programs.
 

(3) Included in other (income) expense, net is a $500 million charge related to the resolution of the arbitration proceeding with Johnson & Johnson, a $136 million gain on the divestiture of the company's interest in the Johnson & JohnsonºMerck Consumer Pharmaceuticals Company joint venture, as well as a $127 million gain on the sale of certain manufacturing facilities and related assets.

 
(4) Includes a net benefit of approximately $700 million relating to the settlement of the company's 2002-2005 federal income tax audit, the favorable impact of certain foreign and state tax rate changes that resulted in a net $230 million reduction of deferred tax liabilities on intangibles established in purchase accounting, as well as the estimated tax impact on the reconciling items.
 
(5) The company calculates earnings per share pursuant to the two-class method which requires the allocation of net income between common shareholders and participating security holders. Net income attributable to Merck & Co., Inc. common shareholders used to calculate non-GAAP earnings per common share assuming dilution was $8,697 million for the first nine months of 2011.
 
                             

MERCK & CO., INC.

FRANCHISE / KEY PRODUCT SALES

(AMOUNTS IN MILLIONS)

Table 3

     
2011 2010

% Change

% Change

Sep YTD

Sep YTD

Full Year

1Q   2Q   3Q   1Q   2Q   3Q     4Q   3Q  

Sep YTD

 
TOTAL SALES (1) $11,580   $12,151   $12,022   $35,753 $11,422   $11,346   $11,125   $33,893   $12,094   $45,987 8   5

PHARMACEUTICAL (2)

9,820 10,360 10,354 30,534 9,665 9,638 9,523 28,826 10,441 39,267 9 6
 
Cardiovascular
Zetia 582 592 614 1,788 534 564 571 1,668 629 2,297 8 7
Vytorin 480 459 469 1,407 477 490 485 1,452 562 2,014 -3 -3
Integrilin 64 56 53 172 70 70 63 203 63 266 -16 -15
 
Diabetes & Obesity
Januvia 739 779 846 2,364 511 600 600 1,710 675 2,385 41 38
Janumet 305 321 350 977 201 218 247 666 288 954 42 47
 
Diversified Brands
Cozaar / Hyzaar 426 406 404 1,236 782 485 423 1,690 415 2,104 -4 -27
Zocor 127 107 110 345 116 117 114 347 121 468 -3 -1
Propecia 106 112 112 330 100 113 109 322 124 447 2 2
Claritin Rx 120 65 55 240 98 58 53 210 86 296 3 15
Remeron 60 57 65 181 51 59 50 160 62 223 29 13
Vasotec / Vaseretic 57 59 57 173 59 63 69 191 64 255 -18 -10
Proscar 60 53 58 171 58 56 58 172 44 216 -- -1
 
Infectious Disease
Isentress 292 337 343 972 232 267 278 777 313 1,090 23 25
PegIntron 166 154 163 482 186 185 168 539 198 737 -3 -11
Cancidas 158 168 150 476 153 150 135 437 174 611 11 9
Primaxin 136 136 124 397 159 158 135 452 158 610 -8 -12
Invanz 87 103 107 296 75 83 91 249 113 362 17 19
Avelox 106 61 59 227 106 59 59 224 92 316 1 1
Noxafil 55 56 61 171 49 50 52 150 48 198 17 14
Crixivan / Stocrin 45 50 56 151 52 48 49 148 58 206 16 2
Rebetol 53 48 38 138 56 55 55 166 54 221 -32 -17
Victrelis 1 21 31 53 0 0 0 0 0 0 * *
 
Neurosciences & Ophthalmology
Maxalt 173 131 156 460 135 133 133 401 149 550 17 15
Cosopt / Trusopt 114 122 124 360 115 123 114 353 131 484 9 2
 
Oncology
Temodar 248 234 223 704 274 271 254 799 266 1,065 -12 -12
Emend 87 120 98 305 84 93 91 268 110 378 8 14
Intron A 49 47 47 143 54 51 50 155 54 209 -6 -8
 
Respiratory & Immunology
Singulair 1,328 1,354 1,336 4,018 1,165 1,258 1,215 3,638 1,349 4,987 10 10
Remicade 753 842 561 2,156 674 669 661 2,004 710 2,714 -15 8
Nasonex 373 323 266 962 320 338 259 917 303 1,219 3 5
Clarinex 155 209 128 492 164 191 131 486 138 623 -2 1
Arcoxia 114 100 108 321 95 95 94 284 115 398 15 13
Simponi 54 75 74 203 10 18 27 55 42 97 * *
Asmanex 60 47 42 149 51 56 48 155 53 208 -12 -4
Proventil 42 37 38 117 57 55 43 155 55 210 -12 -24
Dulera 13 25 22 59 0 0 2 2 6 8 * *
 
Vaccines
Gardasil 214 277 445 935 233 219 316 768 221 988 41 22
ProQuad, M-M-R II and Varivax 244 291 391 927 319 340 434 1,093 285 1,378 -10 -15
RotaTeq 125 148 184 457 93 139 119 350 169 519 55 31
Pneumovax 79 64 133 276 51 59 110 220 156 376 21 25
Zostavax 24 122 108 254 95 18 23 136 107 243 * 86
 
Women's Health & Endocrine
Fosamax 208 221 215 644 230 241 220 692 234 926 -2 -7
NuvaRing 142 154 159 455 135 145 134 414 145 559 18 10
Follistim AQ 133 143 129 404 134 137 119 389 138 528 8 4
Implanon 60 81 80 220 51 51 64 165 71 236 25 34
Cerazette 59 66 74 199 55 49 56 160 49 209 32 24
 
Other Pharmaceutical (3) 744 927 888 2,567 946 941 942 2,834 1,044 3,879 -6 -9
 
ANIMAL HEALTH 758 802 826 2,385 709 731 687 2,126 815 2,941 20 12
 
CONSUMER CARE (2) 517 541 421 1,479 489 544 409 1,442 381 1,823 3 3
Claritin OTC 167 134 118 419 136 167 120 423 103 526 -2 -1
 
Other Revenues (4) 486 448 421 1,355 559 433 506 1,499 457 1,956 -17 -10
Astra 322   306   299   928 364   241   345   950   302   1,252 -13   -2
Sum of quarterly amounts may not equal year-to-date amounts due to rounding.
(1) Only select products are shown.
(2) Beginning in 2011, Merck changed the reporting for certain over-the-counter products. Sales of these products outside the United States were previously recorded in the Pharmaceutical business, and are now reported in the Consumer Care business. Prior period amounts have been recast on a comparative basis.
(3) Includes pharmaceutical products not individually shown above. Other vaccines sales included in Other Pharmaceutical were $54 million, $67 million and $100 million for the first, second and third quarters of 2011, respectively. Other vaccines sales included in Other Pharmaceutical were $55 million, $57 million, $94 million and $75 million for the first, second, third and fourth quarters of 2010, respectively.
(4) Other revenues are primarily comprised of alliance revenue, miscellaneous corporate revenues and third party manufacturing sales.

Contacts

Merck
Media:
Ron Rogers, 908-423-6449
David Caouette, 908-423-3461
or
Investors:
Carol Ferguson, 908-423-4465
Alex Kelly, 908-423-5185

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Contacts

Merck
Media:
Ron Rogers, 908-423-6449
David Caouette, 908-423-3461
or
Investors:
Carol Ferguson, 908-423-4465
Alex Kelly, 908-423-5185